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This Land of Strangers - Robert E Hall

This Land of Strangers

"..the most important book of the decade." — Richard Boyatzis, co-author of best seller Primal Leadership

Relationships, in all their varied forms, have been the lifetime study of Robert Hall. He brings a rare combination of experience as a researcher, consultant, writer, teacher and CEO in dealing with the real-world relationship challenges of modern organizations. When coupled with a decade of hands-on experience in the gritty world of inner-city homeless families it translates into a tapestry of vivid stories, well-researched and oft startling facts, and strategic insights that weave together the yet untold narrative of society's gravest risk and most stellar opportunity.

Year 2011: Looking in New Places for Breakthrough in the Customer Experience

Here is a one-question quiz: What company in 2010 created the largest lead over its competition in customer satisfaction? A hint, its retail stores played a very key role. The answer, which we will get to shortly, is highly relevant to a banking industry facing daunting challenges from three on-going trends.

First we continue to see our customers less. American Banker reports that in the first six months of 2007 compared to the first six months of 2010, the average per-branch transactions fell from 10,000 per month to 9,000. The number of bank branches fell one percent in 2010. Electronic banking, check processing machines, ATMs, kiosks and other technology continue to eliminate face-to-face and even call center interactions. No one wants to get “Netflix-ed” and become the Blockbuster (the bankrupt movie rental company) of banking. But while these technologies may lower cost, it is hard to build stronger customer relationships and revenues when you have less contact with your customers.

Second our customers are less loyal. According to the J.D. Power 2010 survey on Retail Banking Satisfaction, customers are more willing to switch banks now, notwithstanding the hassles of opening new accounts and setting up new links for payments and deposits. The study found that 66 percent of customers would contemplate switching, up from 54 percent three years ago, and that many believe banks are more profit-driven and less customer-focused. Whatever we are doing in the interactions we have with customers is driving them away rather than building commitment. Increased customer switching behavior adds to the cost of closing out accounts and requires expensive customer attraction initiatives to replace defecting customers. All this at a time when new legislation has demolished fee income.

Third, for small business customers, so important at the local market level, projected add-on purchases are down. According to J.D. Powers Small Business Banking Satisfaction Study, these customers exhibit the lowest satisfaction levels. For the second consecutive year satisfaction and residual customer loyalty have declined with only 19% of customers (business owners) saying this year they “definitely will” reuse their financial institutions for additional business products, compared with 34% in 2008 – a huge drop. Small business, a primary source of job creation, is a segment that bank branches should be especially equipped to win.

The net is that customers keep voting for technology and convenience and against in-person interactions, yet they are less satisfied and committed to future purchases with us. Future technology will only exacerbate the problem. It all leads to a key challenge for 2011: How to build customer loyalty and additional business as more of our business is done via technology.

But it’s not like technology and customer satisfaction have to be incompatible. Consider that a leader in the very technology revolution that is impacting financial services so dramatically, Apple, is also leading a revolution in customer satisfaction and the renaissance of retail stores. According to the University of Michigan’s American Customer Satisfaction Index (ACSI) Apple’s nine-point lead over other PC makers – its highest rating ever – is the largest lead for any company over its competition of the 45 categories including financial services. Yes, Apple, whose market capitalization surpassed Microsoft in 2010 as the largest technology company, is the answer to my opening question.

Certainly the popularity of Apple’s innovative iPhone and iPad along with the Mac – considerably more expensive than PCs – has played a key role. Yet it was a personal experience that drove home the point about their stores for me. My wife, who has owned nothing but PCs mentioned purchasing a new laptop. Our oldest daughter responded immediately, “Mom, you have to get a Mac.” Why? “Because of their ‘genius bar’ allows you to walk into a store and get instant, expert technical support.” I had previously bragged on their (highly trained and motivated) roving, in-store checkout clerks who sold me a Mac and completed the transaction on the spot with a mobile checkout device eliminating the trip to the check-out line. For both my daughter and me, it wasn’t just the technology, it was the buying and service experience.

Erica Ogg writing for C-Net describes the strategic role of their stores, “Apple Stores are the best example of what makes it different from its peers and are illustrative of the company’s approach. The retail stores are one of the most important ways people interact with Apple.” This innovative technology leader now has over 300 stores with upwards of 50 million store visits per quarter. Half of those purchasing are first-timers. Apple is building not only a global community but a local community with local relationships where people can return and receive support like classes offered in stores for using their products.

There’s enough irony to leave bank CTOs and CFOs wincing. They are using old-fashioned, heavily and professionally-staffed stores to differentiate themselves from the competition. They have designed a human, face-to-face experience for selling, servicing and providing technical support for state of the art technology. This customer experience pulls millions of young, hip retail and small business customers into their stores. Who says the store is dead?

Several years ago most thought the PC business was a mature, commoditized industry that would duke it out on price; that most purchases would be made on-line; that stores were obsolete; and, that face-to-face interactions would mostly go away.

As we enter 2011 perhaps we should look outside our industry to find providers of innovative products and redesigned customer experiences that excite customers. Surely in the current recession with fear of job loss, ravaged savings and 401Ks, uncertain tax and estate policies, and small business cash flow challenges, there is no shortage of customers who have changing financial services needs.

If a cold-hearted technology firm can break the code on a differentiated store experience and face-to-face interactions, then surely there is an opportunity for us. Our job in 2011 – to find it and make it so.

(Column appeared originally in ABA Bank Marketing magazine – January-February 2011)

By ROBERT E. HALL

Not to be reproduced without written permission. All rights reserved. © Copyright Robert E. Hall 2011

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